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My grandfather recently got diagnosed with early stages of dementia and this past year. His wife passed away in Sept of 2012 and my mother, sister, and I moved in with him to take care or him shortly after in Nov of 2012. Before that decision was made my cousin was signed on to be his POA which at the time no one had any issues with but wasn't discussed with family / and grandpa did it just "because" someone had mentioned he would absolutely need a POA now that my grandmother had passed. Fast forward to around February.. Gpa was in hospital because he got pneumonia shortly after was diagnosed with COPD. During this time my sister and I were his primary caregivers full time because he would have medication induced hallucinations and would require 24/7 supervision. Fast forward to this year: Gpa would get random COPD flare ups that would cause him to have to go into the hospital. In January he had one and ended up in the hospital for 4 days. After the 4 days my mother who is not his POA decided that after talking with the doctor and caseworker at the hospital that because my gpa got kind of weak we would transfer him to the extended care unit to build strength in his legs and arms (he also has parkingsons disease) the caseworker said at anytime that we thought the therapy wasn't working that we could remove him and do out-patient therapy. While there he went down hill drastically .. Wasn't getting the therapy they promised. Was stuck in a depend & in a wheel chair and sat in a room for the entire day except 1 hour of therapy. He always smelled of pee and at one point he soiled himself and was sitting in it. (He never had incontinence issues prior to this stay) We tried to get him removed and the POA then said she wanted him to finish therapy which was 3 weeks long. (After they had said only a week) The POA lives 2 hours away and didn't visit or check on him during this time only would call randomly to see how things were going. Anyway after the 3 weeks he was extremely weak and had began drooling excessively all the time. We had brought him home and not even 4 days later his confusion had hit an all time high and he had a high blood pressure so we went back to the hospital to find out he had a UTI and diverticulitis. The UTI was probably caused by them not cleaning him properly. Fast forward another week in hospital laying in bed he was extremely weak and couldn't make it up the stairs at home so they had to put him back into extended care for even more therapy. Fast forward through an entire mess and almost 2 months later he is finally home and doing amazing. The only issue is, the POA had made comments that he was going no where this past time and she has made it absolutely impossible to communicate with her. Half of the family thinks he should have stayed there and the other half thought he should go home. My grandpa still knows his name, who we are, address, who the president is, the year etc.

Or because of all the prior problems and my grandpas diagnosis of dementia throw it out the window? We don't want to have to go through this again nor does he. He begged to come home constantly and since he's been home he has had 0 incontinence issues and has been perfect mentally.

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Is your grandfather competent enough to change who the POA is? To be able to get gaurdianship, your grandfather will need a doctor to evaluate him and testify to his opinion about your grandfather not being competent to handle his business in a business like manner.
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Also wanted to mention that at this time my sister and I are still his primary caregivers. She covers the night and I do the days: we do help him with bathing, cooking, cleaning, changing his clothes, toileting etc -
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